Dow ETFs are based on the price of the Dow Jones Industrial Average and most Dow ETF funds are designed to mirror the performance of the Dow Jones fairly closely. Because the underlying holdings in a Dow ETF closely reflect the actual component securities measured by the Dow Jones Industrial Average, Dow ETFs generally exhibit the same level of volatility as the Dow Jones itself. Short Dow ETFs are useful in hedging strategies, since they are intended to increase in value during those times when the Dow Jones experiences losses. A Dow ETF makes solid sense for investors who believe the market trend is headed upwards.

How Dow ETFs work

The Dow Jones Industrial Average is one of the leading economic and financial benchmarks in the world. Founded in 1896 by Charles Dow, it tracked the performance of twelve leading stocks weighted according to their dollar value. Today, the Dow Jones tracks thirty leading stocks representing a broad overview of the large cap market; it is often used in market analysis as an indicator of current economic conditions and likely future trends. Dow ETFs typically include most of the securities that comprise the Dow Jones Industrial Average, thus reflecting this benchmark’s performance with a high degree of accuracy. Leveraged Dow ETF funds allow investors to gain greater exposure to the marketplace without a greater initial investment.

Disadvantages of Dow ETFs

Most Dow ETF funds are weighted heavily toward the higher value securities; this is because the Dow Jones is a price weighted benchmark rather than a market cap weighted benchmark. Price weighted benchmarks generally feature higher concentrations of more expensive securities; as a result, Dow ETFs feature the same degree of emphasis on upper-value stocks. Additionally, the Dow Jones Industrial Average consists of stocks from only thirty companies, all large-cap concerns and well-known names. This limits the actual diversity of the underlying securities in a Dow ETF; while a wide range of sectors are represented, the risk factors are all in the large-cap range.

Dow ETF list

Due to the volatile nature of the ETF market, a comprehensive listing of Dow ETFs is not possible. However, here is a listing of some of the most important Dow ETF funds on the market today.
  • SPDR Dow Jones Industrial Average ETF (DIA)
  • ProShares Short Dow 30 (DOG)
  • ProShares Ultra Short Dow 30 (DXD)
  • ProShares Ultra Dow 30 (DDM)
Of these Dow ETFs, the SPDR Dow Jones Industrial Average ETF, or Dow Diamonds, is currently the most popular and widely traded Dow ETF on the market.
Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...
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